BioTech Equity Researcher Interview

Biology – market – finance are all quite diverse fields, but do intersect paths at certain points. Did you ever wonder whether your PhD training could be relevant to financial markets? As it turns out, a PhD graduate is skilled in teamwork, critical thinking and has strong analytical prowess. Add some other important ingredients and the recipe for a successful transition into the corporate world is ready.

Kumaraguru Raja (KR), whose career trajectory evolved from being a microbiologist to an equity researcher, discusses his journey with Parul Chachra (PC). He earned his PhD (Molecular Microbiology) from the Bowling Green State University. After two postdoctoral stints, KR went on to pursue an MBA from the University of California San Diego and found his calling in equity research. He had initially graduated in CBZ (Chemistry, Botany, Zoology from Nizam College, Osmania University) followed by MSc in Environmental Science & Technology from JNTU (Jawaharlal Nehru Technological University)

PC: What does your role as an equity researcher encompass?

KR: I’m involved with equity research in pharmaceutical and biotechnology sectors. Our research is instrumental for institutional investors in composing their investment decisions. I provide insights and detailed analysis on a number of companies whom I cover in the aforementioned sectors. Based on our recommendations and their own analysis, our clients working in mutual funds and hedge funds decide on which companies’ stocks they would like to invest in and how to change positions in stocks they already own. On a day-to-day basis, we do an in-depth research on the companies we cover. We assess factors that have an impact on market valuations and stock prices of the companies – factors pertaining to clinical data, product differentiation, intellectual property, and status in the competitive space. We provide our views on market developments to our clients. Typically, for any company, it starts with initiation reports. Initiation reports consist of an in-depth review of the company, financials, potential of the pipeline, its management and why our clients should invest in them. We also provide coverage reports over time, wherein we provide updates based on the market developments or when the company provides additional data.

PC: What kind of teams exist in equity research? What kind of people do you interact with daily?

KR: The teams typically consist of a senior analyst and a few associates reporting to him. In the healthcare sector, there are various areas like medical technology, medical devices, biotechnology and pharmaceuticals. Each analyst typically covers 15-20 companies with the help of his team. Initially, I started out as a senior associate and at that time our team consisted of one senior analyst and three associates. Currently, I am a senior analyst, and have an associate working with me. We interact with managements of companies we cover, institutional investors, institutional sales and traders.

PC: How did you shape your career trajectory after earning your PhD in microbiology?

KR: I briefly worked as a postdoctoral researcher in Mayo Clinic after my PhD where I focused on cancer epigenetics. From there, I moved to LA BioMed where I pursued research on tumour biology. I always had an inclination towards the business aspect of biotech. I decided to move to the corporate side and opted to pursue an MBA. I went on to join the UCSD management school and graduated in 2010.

PC: When did you decide to go into an offbeat, unconventional and interesting area such as equity research? How did you zero in on it?

KR: I was looking for opportunities where I could utilize my background as a scientist and the skills I had developed in management school. I have always been inquisitive about the stock market and biotechnological innovations. Further, my interests revolved around understanding the commercialisation of academic discoveries and innovations. That was the impetus for me to go for an MBA. After starting management school, I didn’t have a clear idea and I was interested in various opportunities. I found that there were certain areas where my skillset could be useful. That’s when I thought about equity research, especially covering biotech and pharma stocks, as a potential starting point for my career in the corporate world. In this niche, we analyse a lot of companies and it also provides us an opportunity to interact with the management of different companies.

PC: Your answer brings me to another question. When was it that you decided to do an MBA? Did you view it as a necessary step to enter the corporate world?

KR: My postdoc supervisor was a very qualified person. During that time, I saw the challenges that he faced for acquiring grants and a skewed work-life balance that he efficiently managed. That was when I decided that perhaps doing an MBA would be a good idea to diverge from an academic career. While a lot of people manage to transition successfully right after their PhD or early postdoc years, I did not take that route and thought that an MBA would be helpful.

PC: How supportive was your PI when you showed interest in pursuing an MBA?

KR: I didn’t discuss it with my PI at the time. At a later stage, he wasn’t very encouraging when I told him that I was wrapping up my postdoc to do an MBA.

PC: How receptive do you think business schools are towards PhDs or postdocs who haven’t ventured much into corporate and aspire for an MBA degree?

KR: Some schools are more receptive compared to others and that was one of the reasons for me to choose UCSD. They had a lab-to-market course and the focus was on bringing innovations from lab to the market. When I applied in 2008, the program at UCSD was also relatively new, so they were actually very excited about me joining them.

PC: Can you name some schools which welcome incoming MBA candidates with a PhD or postdoc experience?

PC: At what level can people enter into equity research without an MBA degree? Do you have colleagues around without a business degree?

KR: Equity research has a comparatively flat hierarchy and people without an MBA degree start as associates. I have had several colleagues without a business degree who joined directly from academia, but they knew the expectations the role demanded and were prepared for it.

PC: How much credibility exists for self-preparatory courses in your field? Does it impress the employer?

KR: I think compared to someone who doesn’t have similar credentials, it helps you to differentiate yourself. To the very least it shows that you took an initiative to inform yourself. Obviously, your understanding will be tested during the interview process and the decision will be based on that. At the end of the day, even if you go to a great academic institution, it all depends on what you learnt and how you leverage it and contribute to the job.

PC: In what way was your PhD and postdoc experience useful during your MBA and later when you continued as an equity researcher?

KR: There are a lot of skills one develops during their PhD training. The essence of team play is very important in academia and holds true in corporate too. I cover the biotech sector, so we do a lot of fundamental research and look at case studies where drug development is involved, for example, looking at how different molecules work and how they are different from competitive drugs developed by other companies. Also, we look at the different pathways that are affected with a sense of looking at the off-target effects and the side effect profile. These are the attributes that we garner while being trained in science.

PC: You did talk about the challenges of being in academia. What kind of challenges do you face in the corporate sector, especially as an equity researcher, and what do you love about your job? What are the aspects that you are still learning and working on?

KR: Every job has its own advantages and challenges. There are some similarities between doing a postdoc and equity research. This line of work is very competitive and involves long hours. Often it happens that I need to think ahead of time, like what catalysts are coming up and be prepared. I need to do my analysis and get it to clients in a timely manner. Many a times, relevant company announcements are made at 6 in the morning. Some US companies collaborate with their counterparts in Europe/Japan so they release data according to their time zones. One needs to be prepared for all these events. Furthermore, there are press releases after the close of business. As you might guess, being an equity researcher involves investing long hours, which I believe many researchers can relate to. We get to know point-in-time whether our predictions regarding a stock or a clinical trial stood correct. Sometimes we are right, sometimes not. We learn a lot while on the job, plus one gets to interact with a lot of smart people. We routinely interact with CEOs, CFOs, research analysts, portfolio managers and other management team members from mutual funds and hedge funds.

PC: How does the career trajectory of an equity researcher evolve?

KR: Some pursue equity research as a career and continue for a long run. There are others who would move on to corporate finance roles or join as research analysts and portfolio managers in mutual funds and hedge funds after investing a few years. Some move to business development, while others become CEOs or CFOs of companies. There are several exit opportunities for people in equity research.

PC: What kind of equity research opportunities exist in India and overseas?

KR: A lot of equity research options exist in India. For example, people can work for banks and/or cover stocks that are listed in the stock market. Also, a lot of investment banks have research departments based in India and employees in these departments collaborate with employees in the US, UK or Australia. Many teams have their research analysts based in the US/UK and their associates in India and I think that’s a good starting point for people based in India. I have also seen people who took this path and later moved overseas. Additionally, there are opportunities in similar capacities in competitive intelligence which involve expertise that overlap with the skillsets required for equity research.

PC: What kind of quantitative skills do such departments look for?

KR: It depends on the field. In healthcare, we are looking at how clinical trials are powered and we are also involved in market projection. For example, in the case of prostate cancer, you look at the therapeutic space and determine different treatments being developed. Therefore, you also make a lot of estimates in terms of how big the market opportunity is and how many patients can be treated, how a particular drug is differentiated from what is already in the market, and the other drugs that are being developed in the market and then you come up with the potential market share. Additionally, you also do revenue projections. You build profit and loss models, balance sheet, cash flow and you also do a lot of valuations in terms of discounted cash flow. These are some of the skillsets needed for evaluating a company and a candidate possessing such may be the best fit.

PC: Do you suggest pursuing a postdoctoral fellowship if a mid-career graduate student has decided on transitioning into corporate eventually?

KR: It depends on that individual’s situation and it is not necessary to do a postdoc if one has made up their mind to enter corporate. It varies from person to person. Some are successful in landing a position in corporate immediately after their PhD. For others, it doesn’t work out that way. It all depends on how much time you need and being a postdoc provides you that additional time where you prepare yourself for the successful transition.

PC: How crucial is networking for a person who wants to transition from academia to corporate?

KR: Networking is very important and it also helps to converse with people in the field in order to understand what a typical job involves and what are the skills needed. It also provides a better idea on how best can you put yourself in those shoes and determine if this is what you would want to pursue. You also need to base your decisions on personal situations. Some people are married and some people have kids by the end of their PhD/postdoc. I guess one needs to take a holistic view of your their circumstances and then decide what would be the right career for them.

PC: What advice do you have for PhDs and postdocs who are looking forward to a transition and is there anything that they can add to their inventory for better preparation?

KR: One of the aspects that I strongly believe that you should invest in is networking. It is important! People are open to helping out students, communicating with them or mentoring them. And, I think PhDs and postdocs should reach out and find a mentor. Another important point is to differentiate yourself from the crowd. That’s the key to success. When you are working in a lab, or preparing for a transition, you need to individuate yourself. You need to demonstrate why they should choose you over someone else. In my opinion, that is what will get your resume to the top of the pile and ultimately help you in landing the job that you so desire. For example, it helps to take courses in financial modelling or entrepreneurship as a graduate student. It will equip you to differentiate yourself from the herd.